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Daily Archives: November 27, 2010

HJM Interest Rate Simulation Model Earlier we had defined the input cells for the Heath-Jarrow-Merton (HJM) multifactor no-arbitrage model in EXCEL. In this post we will see how the calculation cells are built up. These include cells for calculating the Brownian shocks, Drifts and Spot

In this and a couple of the following posts we will be demonstrating how a Heath-Jarrow-Merton (HJM) three factor no-arbitrage model may be constructed in EXCEL. In this post we will be defining the input cells for the model. This includes among other cells, the

Earlier we had estimated the parameters of the Cox-Ingersoll-Ross (CIR) model from market data. We now apply these estimated parameters to the CIR Model process to simulate future short rates of interest. We will use the derived future short rates along with the implied perfect

In this post we explore how the Cox-Ingersoll-Ross (CIR) parameters are estimated, in other words we consider how the CIR model is calibrated to real world data. The existing literature contains a number of papers that seek to estimate the parameters of the short rate

We review the one-factor equilibrium Cox Ingersoll Ross (CIR) model and its primary features. The short-term interest rate is one of the key financial variables in any economy. It is a target instrument that central banks use to implement monetary policy and an important economic indicator for